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Max Macaluso: So, Brian, let's start by talking about Arena Pharmaceuticals' fourth-quarter results. I listened to the conference call on Monday and was hoping to get a clearer picture of when Belviq will actually be available. The drug is ready to be launched by Arena's partner Eisai, but the DEA scheduling is still not complete. Why is this process taking so long?

Brian Orelli: Belviq has the potential for abuse, so in addition to the FDA approval, the companies had to get the DEA involved.

The drug's potential for abuse is pretty low. The FDA recommended a Schedule IV designation, which shouldn't hamper marketing the drug beyond filling out some additional DEA paperwork. Sleeping aids are usually Schedule IV; Pain medications like OxyCotin or Viodin are either Schedule II or Schedule III and have more restrictions since they have more potential for abuse.

The DEA agreed with the FDA and gave it a Schedule IV designation. But then there's a 30-day public comment period. Then the DEA has to go through the comments before it makes its final ruling.

The comment period ended in January, but Arena's management said the DEA had received a larger than normal number of comments. The ironic thing is I imagine there are a lot of passionate Arena shareholders that sent in comments supporting the drug, maybe even arguing it should get a less-severe Schedule V designation, which is delaying the launch even more.

Macaluso: Assuming the scheduling for Belviq finishes up in the coming weeks and the drug gets on the market, it won't have the same REMS restrictions as VIVUS' (NASDAQ:VVUS) Qsymia. Do you think this might give Belviq an advantage over Qsymia, or will it not make a big difference?

Orelli: There are parts of Qsymia's REMS that are probably hampering it, specifically the requirement that patients go through mail-order pharmacies. But VIVUS is trying to get that expanded to retail pharmacies, so it doesn't look like Arena will have that advantage for much longer.

The REMS also says that doctors are supposed to go through a 15-20 minute training, but that doesn't seem to be a major issue; from mid-December to mid-February, the number of prescribers went up more than 50% to almost 12,000 providers. If Belviq had launched first, the added work by the doctors might have been an issue, but I'm not sure it's a problem now.

And the REMS actually gives VIVUS an advantage because every patient is tracked, so they have excellent data telling their sales force exactly which doctors are prescribing the drug.

Macaluso: Let's talk prices. Arena's management actually revealed the cost of Belviq in the conference call, and it looks like the wholesale price will be $6.65 for the recommended daily dose taken by one patient. That might not be what patients pay because of possible insurance co-pays, but how does it compare to Qsymia's price?

Orelli: It's also not the price patients without insurance would pay because it doesn't include pharmacy markups and potentially volume discounts the pharmacy could get, which would bring the cost down. Those two might counteract each other.

Comparing apples to apples -- as best we can -- the wholesale price for the recommended dose of Qsymia is about $4.50 per day. That's a substantially cheaper -- about $65 per month -- than Belviq. The top dose of Qsymia costs about $6.13 per day, which isn't that far from the price Eisai and Arena plan to charge.

Macaluso: Price is going to be one of the key factors for patients in this market. VIVUS introduced a two-week free trial back in November, and recently started another cost savings program on top of this. Do you think this is a good move, and is it going to hurt Belviq's launch?

Orelli: Absolutely, it's a good move. Patients should be on these drugs for years. It's not much different than a subscription model like Netflix has. Get 'em on the product and then charge full price down the line once insurance is worked out.

Will it hurt Belviq? No, because Eisai will likely do the same. These discounts are about capturing patients -- taking an obesity drug versus not taking a drug -- more than they are about competing with each other.

Macaluso: A second question related to price -- which affects both companies and will also impact Orexigen Therapeutics(NASDAQ:OREX) and Takeda if their obesity drug Contrave gets approved -- is insurance coverage. Is coverage expanding?

Orelli: It's the second question, but the more important one for long-term success of obesity drugs. The difference between paying $200 per month and $20 is a lot. For $20, patients losing just a few pounds per month are likely to stick with the drug. For $200, many will seek out other options if the weight loss is modest ... and it will be for most patients.

Right now the average co-pay for Qsymia is $60, so the drug is still on tier 3 coverage for most plans. The companies need to get the drug down to tier 2, which have lower co-pays. That'll take some convincing. Reducing weight in obese patients should reduce long-term health costs, but insurance companies aren't always focused on the long term since an insured member today might go to another insurance company next year.

Macaluso: Let's close our discussion today with a topic that has been hotly debated. You've said in the past that you think Belviq and Qsymia might become blockbusters, but it'll take more time than investors think. After seeing Qsymia's slow start, do you still think these drugs have billion-dollar potential, or is this market less lucrative than everyone originally believed?

Orelli: The numbers don't lie. At $2,000 per year for treatment, a drug needs to be prescribed to 500,000 patients to be a blockbuster. There over 78 million obese Americans. The drugmakers have to capture a tiny chunk of the market to hit blockbuster status.

Whether Belviq, Qsymia or Contrave can reach that potential will depend on two things: whether doctors will prescribe the drug and whether patients will pay for it. We've already talked about the latter; expanding insurance coverage is a must.

For doctors, it's going to take time. They got burned by fen-phen and Abbott Labs' (NYSE:ABT) Meridia. It's understandable that they're going to take it slow, put a few patients on the drugs, see how it goes, and expand their prescriptions down the road. Contrave is delayed because it had to run a clinical trial to test for cardiovascular issues, but it could end up being a huge benefit to Orexigen since the data will alleviate some of the initial concerns doctors will have.